Is Clorox Co (CLX) About to Shake Its Skeptics?

Despite its fantastic technical performance, Clorox Co (NYSE:CLX) is surrounded by pessimism on Wall Street

by Josh Selway

Published on May 3, 2016 at 2:55 PM

Consumer goods stock Clorox Co (NYSE:CLX) is booming today, despite the broad-market sell-off. The stock has added 3% to trade at $130.79, after the company handily topped expectations with its fiscal third-quarter earnings results -- while announcing the purchase of digestion specialist Renew Life. This shouldn't come as a surprise, though, considering CLX has moved higher following six of its last eight earnings reports. Moreover, the stock has steadily climbed higher in recent years, adding 50% in the past 24 months, and earlier today touched a record high of $132.50. 

With a technical showing like this, one would assume CLX has plenty of optimistic followers on Wall Street. However, the data shows a much different story. In fact, just one brokerage firm recommends buying the stock, while seven deem it a "hold," and four call it a "sell" or worse. Plus, CLX's average 12-month price target among analysts actually sits at a discount to current levels, coming in at $121.42. 

Analysts aren't alone in their seemingly unwarranted pessimism. Clorox sports elevated short-interest levels, as it would take short sellers more than six sessions to cover their positions, at the stock's average daily volumes. Not only that, but short interest actually jumped 12.6% in the latest reporting period, so it's not like these bears have been in a hurry to buy back their shorted shares. 

Options traders have also exhibited bearish traits. During the past 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for example, put buying has outpaced call buying by a slim margin. Even today, after the company's impressive earnings report and all-time high, CLX puts are trading at 12 times the average intraday pace, and more than triple calls.

Taking another look at the charts, CLX gapped above its 100-day moving average today, which marked the stock's intraday high on Monday. The 200-day trendline is also worth mentioning, as it has neatly contained a handful of CLX pullbacks in the past year. 

Based on all this, Clorox Co (NYSE:CLX) appears to be a prime target for contrarian traders. The stock has consistently outperformed on a technical and fundamental basis, yet it is surrounded by doubt. If CLX can continue pushing higher, analysts and traders may come to their senses, and that shift in sentiment could act as yet another tailwind for the stock. 

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